WITH the Jamaica Stock Exchange (JSE) seeking to implement short selling later this year, now would be a great time to go over what this feature is and how you can make money from it.

Currently, the only way someone can make money on the JSE is through dividends and from capital appreciation, which involves buying a listed security at a lower price and selling it at a higher price. As a result, at the moment there’s no way for someone to make money on the decline of a stock price except for averaging down and selling the stock.

Averaging down involves buying more units at the reduced price, which brings down the investor’s average price on the stock. Thus, if someone bought 10,000 shares of a stock at $3 and bought another 10,000 shares at $2.30 the average price becomes $2.65, which makes it easier to break even. Selling the stock involves the possible realisation of a loss, which makes it harder to recoup the capital depending on the magnitude of the loss. In other words, one would need to make a 67 per cent gain to recover from a 40 per cent loss.

https://www.jamaicaobserver.com/business/what-is-short-selling/